Recommended articles: Finance (included FinTech) and Financial Markets

I. Articles:

1. What is Fund Management? Top 8 styles and types (WallStreetMojo).
2. Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In Financial Services (Report, The Big Picture - WEF).
3. Explaining Swaps, or How to Hedge Currencies: QuickTake Q and A (Bloomberg).

II. Papers:

• The FinTech Opportunity: This paper assesses the potential impact of FinTech on the finance industry. I document first that financial services remain surprisingly expensive, which explains the emergence of new entrants. I then argue that the current regulatory approach is subject to significant political economy and coordination costs, and therefore unlikely to deliver much structural change. FinTech can improve both financial stability and access to services, but this requires significant changes in the focus of regulations (BIS).
• FinTech and Financial Innovation: Drivers and Depth.  This paper answers two questions that help those analyzing FinTech understand its origins, growth, and potential to affect financial stability. First, it answers the question of why “FinTech” is happening right now. Many of the technologies that support FinTech innovations are not new, but financial institutions and entrepreneurs are only now applying them to financial products and services. Analysis of the supply and demand factors that drive “traditional” financial innovation reveals a confluence of factors driving a large quantity of innovation. Second, this paper answers the question of why FinTech is getting so much more attention than traditional innovation normally does. The answer to this question has to do with the ‘depth’ of innovation, a concept introduced in this paper. The deeper an innovation, the greater the ability of that innovation to transform financial services. The paper shows that many FinTech innovations are deep innovations and hence have a greater potential to change financial services. A greater potential to transform can also lead to a greater chance of affecting financial stability (FED).

III. Financial Markets:

1. The new dynamics of financial globalization. Cross-border capital flows have fallen 65 percent since the financial crisis as global banks retrenched, but a more stable form of financial globalization is emerging (McKinsey).
2. Financial globalisation and market volatility. While some studies suggest that financial globalisation increases volatility and leads to economic instability, others appear to show that it leads to more efficient stock markets, with higher returns but no increase in volatility. Using a new measure of financial globalisation, this column argues that, on average, it has no significant effect on stock market volatility in developed markets, but it decreases volatility in emerging and frontier markets, where domestic shocks are likely to play a relatively greater role (VOX).
3. Aging Japan Puts a Strain on the Financial System (IMF Blog).